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Dreams Tumble With the Rupiah: Indonesia's Workers Put Hopes for a Better Life on Hold

By Paul Blustein, in the Washington Post
23 January 1998, p. A29

KARANG ASEM, Indonesia - A 42-year-old laborer named Wares sat in his ramshackle shop off the dirt road running through this village in central Java and glumly pondered what the Asian financial crisis will mean for his family.

"Up until now, most of my spare money was going to pay for my kid's school," he explained, his mustachioed face clouding. "Now I don't know what I'm going to do."

Last weekend, Wares -- who, like many Indonesians, uses only one name -- lost his job as a construction worker building residential housing in a nearby city. He figures he can eke out a living by doing odd jobs, and his wife makes some money peddling snacks in a local market. But the dream of giving his son a high school education -- which only about one in five children receive -- may collapse because he won't have enough to pay for tuition, uniforms and books.

In villages like Karang Asem, and in small towns and cities across Indonesia, the nation's financial problems are starting to inflict real pain on the people. And those hurt most are, like Wares, the people who can least afford to lose.

For the past six months, the effects of the crisis have been concentrated mostly in the ethereal world of financial markets. Indonesian stock prices have tumbled and the nation's currency, the rupiah, has lost more than 80 percent of its value against the U.S. dollar.

Now the crisis is moving into a new and potentially more explosive phase as citizens of the world's fourth most populous country lose their jobs and struggle with much higher prices for everyday goods such as rice and cooking oil.

There are no exact figures for how many Indonesian workers have been laid off, but authorities do not quarrel with estimates by labor organizations that the number is approaching 1 million and rising fast. Economic growth, which ran at a robust annual pace of 6 percent to 7 percent over most of the past quarter-century, is officially projected to fall to zero this year, with inflation soaring to 20 percent.

Even these bleak forecasts are viewed as too optimistic by private analysts, because the massive flight of capital has left many companies starved for the cash they need to keep operating.

Adding to the economic nightmare is a severe drought that has turned rice fields brown and ruined crops in many parts of the country.

"Some people who lose their jobs will come back here and work as farmers, but there isn't that much to farm in this area," said Pujo, a neighbor of Wares in Karang Asem, whose farmers lament that it has rained only three times in a rainy season that usually begins in November.

The multiple woes afflicting the country mean that safety valves traditionally open to the dispossessed are being closed. Usually, when a village is stricken by drought or some other disaster, residents stream to the cities; and when times get hard in the cities, the flow is reversed. But now, opportunities are dwindling everywhere, including wealthier neighboring countries such as Malaysia, which is having its own economic problems and is considering shipping home its Indonesian guest workers.

Dennis de Tray, head of the World Bank's country program for Indonesia, worries that many Indonesians are heading for desperate times. "If the drought continues, which it appears to be doing, and the financial crisis doesn't get better, which it doesn't appear to be doing, it's going to be a very delicate period over the next six months to a year," he said.

All of this adds up to a volatile social brew that helps explain why, despite a widely hailed agreement on economic revisions announced Jan. 16 by President Suharto and the International Monetary Fund, investors have remained skittish of the rupiah. The currency has fallen about 59 percent since last week's announcement.

In recent days, riots broke out in several towns in East Java as townspeople looted shops they accused of charging excessive prices for staple foods. Authorities are bracing for more violence. On Tuesday, city officials in Jakarta were quoted in the local press declaring their intention to strictly enforce a ban on Chinese New Year celebrations because of fears that ostentatious displays by the wealthy ethnic Chinese minority would spark violence by resentful members of the Muslim majority.

The government, hoping to keep armies of the unemployed from gathering in big cities, has offered special incentives for jobless people to stay in their home villages when they visit their families for the traditional end-of-Ramadan feast starting this coming weekend. The national railway is selling one-way tickets home from Jakarta at a 70 percent discount to people who have lost their jobs in the capital.

Up the mountain road from Karang Asem, in the village of Kemiri, a worker named Marwanto, 27, had just returned a week ago -- not from Jakarta, but from Kalimantan on the island of Borneo, where he worked for two years in a plywood factory before being laid off along with 500 others.

Marwanto hadn't heard of any jobs opening up, so he'll farm a little on his family's land, he said, and live off money he saved from his old job. But asked how long his savings will last, he grew morose and put his head in his hands. "I don't know. Maybe it will last a month -- if I eat with my family all the time," he replied.

Even in places not affected by drought, ordinary Indonesians are being forced to tighten their belts.

Just off the main road in Puncak, a town south of Jakarta, about 15 ojek drivers -- young men who sell rides on their motorcycles -- were sitting around a shelter trying to keep out of the broiling sun. Muliyadi, 26, wearing a baseball cap emblazoned with "Cool Fun Basic," said that in the past couple of months, his average daily income has fallen roughly by half, to around 5,000 rupiah -- only 40 cents at current exchange rates.

"Since the price of everything is going up, people are walking instead of taking ojek," he lamented, adding that he is having to forgo favorite foods he was planning to buy for the end-of-Ramadan feast, such as peanuts, which doubled in price recently.

Another member of the group, Acam, was laid off from a cleaning job a month ago at one of Indonesia's many troubled banks. Now he is scrambling to replace the wages he lost by raising a few vegetables and hanging around with the ojek drivers in the hopes that he can borrow one of their motorcycles and earn a little cash, since he doesn't own one himself. At 40, he has four children to support -- and, he added proudly, three wives. "The economy might be weak, but I'm still young," he said as his friends roared with laughter.

Most Indonesians are still working and have avoided suffering declines in their wages, but a widespread, seemingly universal complaint is that, suddenly, their money doesn't go nearly as far as it used to.

The price of rice -- which is eaten with almost every meal -- rose 26 percent last year, and cooking oil, which is widely used in most homes, is up more than 100 percent in some areas. Reasons for price increases vary by product, but for the most part, the problem stems from a combination of the drought and the fall in the rupiah, which has driven the cost of imported products sharply higher.

Electricity and gasoline bills are likely to surge as subsidies are eliminated under the IMF agreement, although the fund allowed the government to continue subsidizing kerosene for a number of months, since that fuel is used extensively by the poor for cooking.

"My income is not rising, but the costs of a lot of things definitely are," said Nanang Suriyadi, 30, a factory worker in Tegal, south of Jakarta.

A LOOK AT INDONESIA

Land: A sprawling archipelago, extending more than 3,000 miles along the equator. About half of its 13,667 islands are inhabited; 60 percent of the people live on volcano-studded Java.

People: 204 million. Projected population: 240 million in 2010; 276 million in 2025. It is the fourth most populous country after China, India and the United States. About 31 percent of the people live in urban centers.

Life expectancy: male 62 years, female 66.

Adult literacy: 83%

Religion: 87% Muslim

Economy: President Suharto has run a tightly controlled government. He has hemmed in the news media, has neutralized the opposition and has been accused of human-rights violations. But Indonesia's economy has thrived in the 1990s with growth rates of 6 percent to 8 percent and a healthy trade surplus. In the past few months, however, the economy has gone into steep decline as a result of mounting debts, corruption and other problems.

Income: Per capita annual income: $3,090, adjusted to purchasing power. Proportion of people living in poverty: 8%

SOURCES:

=A9 Copyright 1998 The Washington Post Company